Total Pageviews

Thursday, 25 February 2016

A Dutch retail canary in a European coal mine

Some 20 years ago there was quite an international discussion about the future of 'bricks' and 'clicks' in retail (eg, Wiki). This discussion vanished as 'brick' stores and online shops both flourished together for many years. Today this old discussion is very relevant in The Netherlands as brick stores are losing rapidly from online shops.

In my (Dutch) blog of 6 December 2014, I outlined the many bankruptcies in the Dutch retail sector and its reasons: (1) continued economic crisis, (2) mismanagement due to egos and greed, (3) highly leveraged company financing, (4) excessive shop rents based on excessive commercial real estate valuations, (5) excessive car parking rates compared to "free" online transport charges, and (6) a structural shift from 'bricks' to 'clicks'. This trend has continued ever since (eg, NL Times)

In 2014, I considered this retail decline as a typical Dutch phenomenon. Today, I am wondering if that assessment was right. Essentially, most of the reasons for the rapid decline of the Dutch retail sector appear to be universal. A Dutch newspaper article of 24 February 2016 mentions several retail problems in other European countries (Belgium, France, Germany, Spain, UK) but nothing like what is happening in The Netherlands today. I am inclined to believe that the Dutch are just ahead of a European retail trend.

According to The Economist of 18 April 2015, more than 90% of the world’s businesses are family-managed or -controlled. The Dutch bankruptcies in the retail sector appear to be mainly in that other 10%. To some extent, Dutch family businesses are even picking up the (best) pieces (eg, NL Times). I doubt that the ownership of Dutch retail chains is more biased towards listed companies and/or Private Equity rather than family businesses.

I am convinced that the decline in the retail sector and the surge in online shopping is related to an ongoing demographic shift. Old(er) people are reluctant to buy online (eg, IT fears, lack of trust in online banking) while the life of young(er) people is already mostly online (eg, dating, Facebook, games, music, shopping, WhatsApp, YouTube).

To some extent, the Dutch retail sector already shows a shift from 'products' to 'services' (eg, bars, cafes, restaurants, and even Chinese massage & nail parlours). In general, services compete less on price and more on place (ie, location) and promotion (ie, advertising). Brick stores usually lose customers on 'price' in case of a similar product and non urgent shopping.

Lastly, there is also a political component. As long as (European) trade unions and municipalities view entrepreneurs as the 'enemy' and 'cash cows', the decline of the retail sector will continue and probably even accelerate. Jobs are created in the private sector and taxes levied on the private sector - including the wages of its employees - allow for jobs in the public sector. This is the essence of a social-market economy and nothing else.

The massive loss of jobs in the Dutch retail sector may be a canary in a European coal mine (Wiki). Perhaps it's even related to the expected jobs disaster due to AI and robotisation (eg, FT, Guardian). The Technological Revolution (1800-2100) is still increasing its pace.

The Police - Canary in a Coalmine (1980) - artists, lyrics, Wiki


No comments:

Post a comment